Does labour quality matter on productivity growth? The case of the Taiwanese manufacturing industry

Although the importance of labour quality has long been recognised, its impact on productivity or economic growth has seldom been examined. Some studies have attempted to identify how labour quality and economic development are related; however, most of these studies employ proxy variables to represent labour quality. The indicators used in previous investigations did not incorporate many important aspects of labour quality such as the structural changes in the workforce, occupational safety, worker ethics, industrial relations, etc. The objective of this work is to employ a more comprehensive indicator of labour quality to examine its influence on manufacturing productivity. By using the Taiwanese manufacturing industry as an example, in this study we are able to confirm that labour quality is an important contributing factor in explaining Taiwanese manufacturing sector's changes in productivity and its subsequent management and policy implication are then discussed accordingly.